David Einhorn's Greenlight Says EMC Trades at 'Sizeable Discount'

By David Benoit and Rob Copeland 

David Einhorn's hedge fund Greenlight Capital Inc. became the latest big investor to call into question the corporate structure of data-storage giant EMC Corp.

In Greenlight's quarterly letter to its investors Wednesday, Mr. Einhorn wrote that EMC trades at a "sizable discount" because of its conglomerate-like structure of several businesses that "essentially operate as independent companies."

EMC runs three businesses under what it calls a "federation strategy." There is its traditional data-storage business, its 80% stake in VMware Inc., a pioneer in computer-server software, and software-development company Pivotal.

Greenlight made a new "medium-sized" investment in EMC, according to the letter, which doesn't disclose the specific size of the stake. As of the end of June, Greenlight owned 5.9 million EMC shares worth about $171 million, according to an earlier filing.

The Hopkinton, Mass., company was already under pressure from activist investor Elliott Management Corp., which had taken a more-than 2% stake and called for it to split up. EMC's market value currently stands at nearly $60 billion.

Separately, Mr. Einhorn has previously warned of a market bubble, particularly in technology stocks, and wrote Wednesday that he was increasing his short positions in what he termed "bubble basket stocks."

He also teased a potential short position in Amazon.com Inc., though he stopped short of explicitly saying he was betting against the shares.

"One of the principal bullish assumptions supporting many bubble stocks is, 'the company is growing too fast to be very profitable,'" he wrote. Amazon "is just one of many stocks for which this narrative will ultimately prove false."

Mr. Einhorn also disclosed a stake in coal mining company Consol Energy Inc.

Write to David Benoit at [e-mail] and Rob Copeland at [e-mail]

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